Ipr In Frand Licensing Obligations.
IPR in FRAND Licensing Obligations
1. Introduction
FRAND licensing obligations are associated with standard-essential patents (SEPs).
Standard-essential patents (SEPs) are patents that are essential for implementing an industry standard.
For example, in telecommunications, patents covering LTE, 5G, or Wi-Fi standards are often SEPs.
Owners of SEPs are obligated to license them on FRAND terms to ensure fair competition and interoperability.
Key Objectives of FRAND
Prevent Patent Hold-up – Prevent SEP holders from charging excessive royalties after a standard is adopted.
Promote Standardization – Ensure widespread adoption of technological standards.
Fair Compensation – Provide reasonable royalties to patent holders.
Non-Discrimination – All implementers should receive licenses on similar terms.
2. Legal Basis for FRAND
Patent Law – SEPs are still protected by patent law, but licensing terms are subject to FRAND commitments.
Competition Law – Abuse of SEPs may violate antitrust or competition laws.
Contract Law – FRAND commitments are often formalized in licensing agreements or standard-setting organization (SSO) policies.
3. Key Principles in FRAND Licensing
| Principle | Explanation |
|---|---|
| Fair | Reasonable compensation for patent use without overcharging. |
| Reasonable | Royalties should reflect the contribution of the patented technology to the standard. |
| Non-Discriminatory | Terms must be consistent across licensees, avoiding favoritism or exclusion. |
| No Hold-Up | SEP holders cannot exploit their market power after the standard is adopted. |
| Good Faith Negotiation | Both patent holders and implementers must negotiate in good faith before seeking injunctions. |
Case Laws on FRAND Licensing
Case 1: Microsoft v. Motorola (USA, 2012)
Background
Motorola held SEPs for Wi-Fi and video codecs.
Microsoft refused Motorola’s licensing terms, claiming excessive royalties.
Legal Issue
Are Motorola’s demanded royalties consistent with FRAND obligations?
Decision
Court held that Motorola violated FRAND obligations by demanding royalties far exceeding reasonable rates.
Established the principle of ex-ante royalty evaluation (based on hypothetical licensing before standard adoption).
Significance
Introduced quantitative methodology for FRAND rates.
Courts can impose FRAND-compliant royalties in disputes.
Case 2: Huawei v. ZTE (European Court of Justice, 2015)
Background
ZTE accused Huawei of SEP infringement and sought injunctions.
Huawei argued it offered a FRAND license.
Legal Issue
Can a SEP holder seek an injunction under FRAND commitments?
Decision
ECJ held that a SEP holder may seek injunctions only if:
FRAND license offer is made in good faith.
Licensee refuses without a valid reason.
Courts emphasized balancing SEP rights with fair access to standards.
Significance
Framework for injunctions and negotiation obligations under FRAND.
Encourages good faith negotiation before litigation.
Case 3: Ericsson v. D-Link (USA, 2014)
Background
Ericsson held SEPs for 3G/4G wireless standards.
D-Link challenged royalties as excessive and discriminatory.
Legal Issue
How should FRAND royalties be calculated?
Decision
Court applied Georgia-Pacific factors (modified for SEPs) and awarded a FRAND-compliant royalty rate.
Emphasized no double-counting of SEPs and consistent licensing terms.
Significance
Reinforces the reasonable royalty principle.
FRAND royalties reflect the incremental contribution of patented technology.
Case 4: Unwired Planet v. Huawei (UK, 2020)
Background
Unwired Planet sued Huawei for SEP infringement for 2G, 3G, 4G standards.
Huawei argued Unwired Planet’s licensing terms were non-FRAND.
Legal Issue
Can a court impose global FRAND royalty terms?
Decision
UK court held that Unwired Planet must offer global FRAND terms.
Court determined FRAND rate using top-down methodology, allocating royalty based on SEP contribution.
Significance
Global licensing strategies must comply with FRAND terms.
Top-down vs bottom-up methodologies are now widely referenced for FRAND calculations.
Case 5: Sisvel v. Haier (Italy, 2016)
Background
Sisvel owned SEPs for audio/video standards.
Haier challenged royalty demands as non-FRAND.
Legal Issue
Are royalty demands fair and non-discriminatory?
Decision
Court emphasized non-discriminatory licensing.
Sisvel’s licensing terms were modified to ensure similar terms for all licensees.
Significance
Reinforces non-discrimination principle in FRAND licensing.
Prevents preferential treatment in licensing agreements.
Case 6: Microsoft v. Motorola II (USA, 2015, Appeal)
Background
Appeal from the 2012 decision.
Microsoft challenged court’s royalty calculation.
Legal Issue
Should FRAND rates consider entire standard contribution or only specific SEP value?
Decision
Court reaffirmed smallest salable patent-practicing unit (SSPPU) principle.
FRAND royalty must reflect proportionate contribution of SEPs, not full device price.
Significance
Introduced practical approach to royalty calculation, widely cited in FRAND disputes.
Case 7: Apple v. Qualcomm (USA, 2019)
Background
Qualcomm held SEPs for cellular standards.
Apple argued licensing fees were excessive and discriminatory.
Legal Issue
Enforcement of FRAND obligations and injunctions.
Decision
Settlement included FRAND-compliant licensing rates, confirming courts’ role in regulating SEP licensing.
Courts emphasized good-faith negotiation and global consistency.
Significance
FRAND obligations are enforceable even for large multinational tech disputes.
Licensing settlements often incorporate court-supervised FRAND principles.
4. Key Takeaways on FRAND Licensing
Good Faith Negotiation is Mandatory – SEP holders cannot immediately seek injunctions.
FRAND Royalties – Should reflect incremental contribution of SEPs (SSPPU or top-down method).
Non-Discrimination Principle – Terms must be consistent across licensees.
Global vs Local Licensing – Courts may impose global FRAND terms to avoid hold-up.
Injunctions Are Limited – Only enforceable if licensee refuses FRAND-compliant offer.
Calculations – Must avoid double-counting and excessive device-based royalties.
5. Conclusion
FRAND obligations balance IP protection and competition policy:
SEP holders are entitled to reasonable compensation, but cannot exploit standards monopolistically.
Courts worldwide (US, UK, Europe, Italy) have established frameworks for FRAND royalty calculations, injunctions, and licensing fairness.
FRAND licensing is essential in telecom, AI, IoT, and standard-driven industries.
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